The Dreaded IRS Audit

If there were a way to guarantee avoidance of an Internal Revenue Service (IRS) audit, there isn’t a person in the country that wouldn’t want to get his hands on that secret sauce.  But there isn’t.  You never know if your return is going to be one of the approximately 1.11% of returns that are selected for audit each year.  However, there are several factors that are known to increase your chance of audit:

  1. High income (particularly income exceeding $200,000)
  2. Large charitable donations
  3. Claiming the home office deduction
  4. Claiming rental losses
  5. Deducting business meals, travel, and entertainment
  6. Claiming 100% business use of vehicle
  7. Running a cash business
  8. Engaging in currency transactions
  9. Taking higher-than-average deductions

Of course if you try to pull shenanigans on your tax return then you open yourself up to greater scrutiny too.  For instance, don’t try any of the following:

  1. Failing to report all taxable income
  2. Writing off hobby losses
  3. Failing to report a foreign bank account

An audit can be a simple, single-issue question, or it can be a complicated, tedious process that results in an assessment of additional taxes.  If the assessment causes a tax debt that cannot be paid, a tax relief attorney may need to be retained.

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